Buying a Franchise in Saudi Arabia: How to Review Marketing Fees

Marketing fees may seem minor compared with the cost of fitting out an outlet, but they are a recurring commitment that deserves a separate review before you buy a franchise in Saudi Arabia. Across a franchise network, shared campaigns bring outlets together under one brand, but their value depends on clear arrangements for collecting contributions, spending them and ensuring accountability. This guide helps you assess your marketing contribution without confusing it with royalties for using the brand or general promises of higher sales.

1. Identify all marketing commitments before comparing brands

Do not start by asking only about the fee percentage. Request a written list of every marketing payment you will need to make, who receives it and when it falls due. An offer may include a regular contribution towards brand campaigns, a compulsory budget for local outlet marketing and a separate launch campaign charge. Other costs, such as photography or social media account management, may appear in separate schedules.

Classify each amount as a fixed commitment, a sales-based commitment or optional spending requiring prior approval. Then ask whether the local marketing budget counts towards your overall contribution or is payable on top of it. The phrase ‘marketing included’ is not enough if the agreement allows additional services to be invoiced separately.

Also ask how VAT will be treated on invoices, and consult an accountant to understand its effect on cash flow. When comparing two brands, compare the total commitments, not just the advertised percentage: a lower contribution may come with greater local spending requirements.

2. Check the calculation basis and who can change the fee

If the contribution is linked to sales, the definition of sales can sometimes matter more than the percentage. Ask for a written worked example based on an actual sales cycle, showing how tax, returns, discounts, vouchers and sales through delivery apps are treated. Is the contribution calculated before or after the app’s commission is deducted? How are cancelled orders handled?

Check payment timing too: does the fee become due when a transaction is recorded, or after payment has been received? If there is a monthly minimum, does it still apply during a delayed opening or temporary closure? Do not assume that all fees stop when sales stop.

Look through the agreement and its schedules for the franchisor’s authority to change the percentage or impose an exceptional contribution. Negotiate clear provisions on notice, limits on changes and how unbudgeted campaigns will be handled. These are points to negotiate and document, not automatic rights that come with joining a franchise network.

3. Find out where your contribution goes and who decides

Ask for a written policy on managing marketing contributions. It should set out what the money can be spent on, who approves the budget and how unused balances are handled. Ask whether expenditure includes the franchisor’s staff costs, fees paid to an agency connected to the franchisor or content used outside Saudi Arabia.

These expenses do not, in themselves, make the arrangement unsuitable; the problem is paying without knowing the scope of permitted use. In particular, distinguish between campaigns that attract customers to outlets and campaigns that recruit new franchise buyers. Ask whether franchisees’ contributions fund the latter, and which contractual provision allows this.

Do not expect every Saudi riyal you contribute to come back as advertising specifically for your outlet. A campaign may benefit the brand as a whole, but you should understand how marketing attention is allocated between cities, outlets and digital channels. Also ask whether franchisor-owned outlets contribute, so that you understand how costs are shared.

4. Agree on reporting that can be checked

Request a sample of a previous marketing report with confidential information redacted. A useful report links the amounts collected to expenditure and campaigns delivered, and explains both the results and the limits of their measurement. Views and follower counts alone do not show how spending affects visits or orders at your outlet.

Propose including the following points in the agreement:

• How often reports will be provided, their delivery deadlines and the core information they will contain.
• Separate line items for administration, production and advertising space purchases.
• A process for querying expenditure and receiving a response within an agreed period.
• Whether an accounting review is available, along with its scope, cost and confidentiality requirements.
• How transactions with parties connected to the franchisor will be disclosed.

Do not assume that paying a contribution automatically gives you full access to the franchisor’s accounts. Define reporting and review rights in the agreement, and consult a lawyer to check that they are enforceable. You can also ask existing franchisees whether reports arrive regularly, without requesting confidential information or relying on the experience of just one outlet.

5. Formalise the arrangements within the Saudi legal framework

Franchise agreements carried out within Saudi Arabia are subject to the Commercial Franchise Law and its Implementing Regulations. The franchisor must provide the franchisee with a disclosure document at least 14 days before the agreement is signed or any franchise-related payment is made, whichever comes first. Use this period to check that the marketing fees and policies match the agreement and its schedules, rather than relying on a verbal sales pitch.

The franchisor must also register the agreement and disclosure document with the Ministry of Commerce within 90 days of signing the agreement. This regulatory obligation does not replace an assessment of whether the marketing clause is fair and clear. Ask for any material promise, such as regular reporting or a contribution towards the launch, to be clearly written into the agreement or a signed addendum, with the order of precedence between documents specified in case of conflict.

The practical takeaway: Do not agree to marketing fees until you can clearly explain five things: what you pay, how it is calculated, where it is spent, who can change it and how you can review its results. If the answers remain vague, ask for them to be documented before committing.